Hilco v. Engreen, 2016 ONSC 1792

CITATION: Hilco v. Engreen, 2016 ONSC 1792

COURT FILE NO.: 15-0727

DATE: 2016-03-15

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Hilco Industrial Acquisition Canada ULC

Plaintiff/Moving Party

– and –

Engreen Maitland Inc.

Defendant/Responding Party

– and –

Engreen Maitland Inc.

Plaintiff by Counterclaim

Hilco Industrial Acquisition Canada ULC, Hilco Global, Hilco Industrial LLC, Hilco Industrial Canada ULC, Hilco Asset Sales Canada Corp., Baker Rigging & Mechanical Inc. and AuctionReady Inc.

Defendants to the Counterclaim

COUNSEL:

Tom Friedland, for the Plaintiff/Moving Party

Anthony Guido, for the Defendant/Responding Party

Anthony Guido, for the Plaintiff by Counterclaim

Tom Friedland, for the Defendants by Counterclaim

No one appearing for any other parties

HEARD: March 8, 2016

REASONS FOR DECISION ON MOTION

sheard j.

[1] There were two Motions before me today. The first was brought by the law firm of Halfnight & McKinlay (“the Lawyers”) to be removed as lawyers of record for Engreen Maitland Inc. (“Engreen”) (“the Lawyers’ Motion”).

[2] Anne Juntunen appeared on behalf of the Lawyers. Anthony Guido, President of Engreen, appeared for Engreen on the Lawyers’ Motion. Tom Friedland, appeared on behalf of the plaintiff, Hilco Industrial Acquisition Canada ULC (“Hilco”).

[3] The second motion was brought by Hilco on March 8, 2016 to enforce the interim minutes of settlement between Hilco and Engreen (“the Hilco Motion”). That settlement was with respect to the injunction motion brought by Hilco in November 2015 (“the Injunction Motion”).

[4] I heard the Lawyers’ Motion first. Before determining whether to remove the Lawyers from the record, I made it clear to counsel and to Mr. Guido that if I removed the Lawyers, Mr. Guido might be obliged to argue the Hilco Motion without the benefit of counsel. Although Mr. Guido reserved his right to seek an adjournment of the Hilco Motion, he did not oppose the Lawyers’ Motion. Mr. Friedland was also asked if he would object to Mr. Guido arguing the Hilco Motion, should the Lawyers be removed as lawyers of record for Engreen. Mr. Friedland was content that Mr. Guido argue the Hilco Motion on behalf of Engreen.

[5] After hearing submissions, I granted the Lawyers’ Motion and they were removed as Engreen’s lawyers. My endorsement is found on the Lawyers’ Motion record. I then considered the Hilco Motion.

Contested Adjournment Request

[6] Mr. Guido sought an adjournment of the Hilco Motion. This request for an adjournment had been communicated by Mr. Guido to the Lawyers by email on March 3, 2016. The Lawyers forwarded Mr. Guido’s email to Mr. Friedland. In his reply of March 4, Mr. Friedland was clear that Hilco would strenuously oppose an adjournment and that, if required to have the Hilco Motion heard, would resist the Lawyers’ Motion. Mr. Guido was well aware of Hilco’s position.

[7] Engreen’s adjournment request came to the attention of Justice Brian Abrams, Acting Local Administrative Judge at Brockville. Via email from the trial coordinator at Brockville, the Lawyers were told that they should be prepared to argue the Hilco Motion on March 8.

[8] In making his adjournment request, Mr. Guido advised that, although he had not yet served a Notice of Change of Lawyers, he had two law firms on standby. One firm had apparently agreed to act for Engreen. The principal of the other law firm had been or was away.

[9] At the hearing, inquiries were made of possible alternate dates for the Hilco Motion. The trial coordinator advised that the Hilco Motion could be heard on March 20 or April 26, 2016. Mr. Guido was given a chance to ask his “standby” lawyers about availability. He did and advised the Court that his lawyer of choice was not be available on March 20 but could send someone else from his office on that date. His preferred lawyer was available on April 26, 2016.

[10] Consistent with the correspondence exchanged in advance of its motion, Hilco strenuously opposed any adjournment.

Engreen Filed Responding Materials

[11] Mr. Guido was aware that Engreen might not be permitted to adjourn the Hilco Motion. On March 8, 2016, he served a bound responding record on behalf of Engreen (“the Engreen Record”). The Engreen Record contained:

(a) Mr. Guido’s responding affidavit sworn March 8, 2015. This five-page affidavit contained 15 exhibits;

(b) a copy of the affidavit sworn by Mr. Guido on November 26, 2015, delivered in response to the Injunction Motion;

(c) a copy of the affidavit sworn on November 26, 2015 by Jennifer Koyll, V.P. of sales for Royal Canadian Bedrock, a dimension stone processing and aggregates company owned by Mr. Guido. This affidavit was also sworn and delivered on behalf of Engreen in response to the Injunction Motion; and

(d) a copy of the affidavit of George Wilson, project manager/estimator for active mechanical service and industrial plumbing and heating company. He had personally inspected the building which is the subject of the underlying litigation. This affidavit was also sworn on November 26, 2015 and delivered on behalf of Engreen in response to the Injunction Motion.

[12] I heard submissions from Mr. Friedland and Mr. Guido respecting Engreen’s adjournment request. I also heard submissions from Ms. Juntunen, before the Lawyers were removed. She advised that the Lawyers could not continue to act or advise Engreen on the Hilco Motion as the Lawyers were in a conflict of interest.

[13] I invited counsel and Mr. Guido to use the morning break to try to resolve either the adjournment request or the merits of the Hilco Motion. They were unable to do so.

[14] After hearing submissions and reading all the materials before me, including the Engreen Record and the Lawyers’ Record, I determined not to grant the adjournment request. I advised counsel and Mr. Guido that I would grant the Lawyers’ Motion and would allow Mr. Guido to represent Engreen on the Hilco Motion, which would proceed that afternoon.

[15] In deciding not to grant Mr. Guido’s request for an adjournment on behalf of Engreen, I considered:

(a) the prejudice to Hilco of an adjournment. The prejudice included: financial harm and reputational damage to Hilco;

(b) the possibility that Hilco would be sued by the buyers of the equipment Hilco sold but which remained in Engreen’s premises to which Engreen refused access;

(c) that time has been of the essence to Hilco. The Injunction Motion was originally brought in November 2015 and returnable November 18, 2015. Before the first return date, counsel for the parties agreed to adjourn the Injunction Motion to December 11, 2015. Details of terms of the adjournment, including a timetable for delivery of reply materials, were set out in a letter to the Court dated November 17, 2015. This letter was sent with the knowledge and approval of Engreen, then represented by the Lawyers;

(d) that on December 1, 2015, the parties signed Interim Minutes of Settlement to settle the Injunction Motion (“the Minutes”). The Minutes provided that a letter be sent to the Court advising of the settlement. That letter is dated December 7, 2015 and states that Engreen will give Hilco and others access to Engreen’s property to remove the remaining purchased assets, subject to certain terms.

(e) that as a result of the Minutes, Hilco gave up its December 11, 2015 hearing date for the Injunction Motion;

(f) that the Minutes themselves allow Hilco to seek a new date for a motion on an expedited basis and include Engreen’s consent to such motion being heard on an expedited basis, if required;

(g) that Mr. Guido is an educated and experienced businessman. In his affidavit sworn November 26, 2015 he notes his background in business and consulting. He completed his B.B.A. at the Schulich School of Business in 1986 and his Chartered Accountant designation in 1990. He has operated his construction aggregates business since 2010, in Canada and abroad, through his company, Royal Canadian Bedrock. He is also the president of Engreen, which purchased a large industrial building known as building 755/711 from DuPont (“the DuPont Factory”);

(h) that Mr. Guido came to the court on March 8, 2016 prepared with the Engreen Record, which contained his (Engreen’s) explanation for why the Minutes ought not to be enforced;

(i) that Mr. Guido had been negotiating and speaking on behalf of Engreen on the transactions which led up to the litigation and personally signed the Minutes. The motion records document that Mr. Guido had been speaking for Engreen and emailing the principals of Hilco with respect to the issues. He has been hands-on and communicating directly with Hilco, rather than through the Lawyers;

(j) that Mr. Guido was fully informed of all of the facts and circumstances relevant to the Hilco Motion and, given his education and business experience, would be able to clearly articulate Engreen’s position on the Hilco Motion;

(k) that the Hilco Motion was served February 18, 2016. The Lawyers’ Motion was served on Engreen on February 29, 2016 at 6:40 p.m. The Lawyers’ Motion was filed with the court on March 2, 2016. It was not served on Hilco, who obtained a copy from the court office after;

(l) that Mr. Guido advised the Court that there was a breakdown with the Lawyers sometime between January 27 and February 2, 2016 concerning, in part, the Minutes that he no longer wanted to honour. Despite that, Mr. Guido did not formally retain new counsel and the Lawyers were required to proceed with their removal motion;

(m) that, in the face of knowing of the breakdown with the Lawyers, and of the threatened Hilco Motion and the Lawyers’ Motion, Mr. Guido did not move quickly to retain new lawyers. Engreen had not formally retained new lawyers as at March 8;

(n) that the Lawyers had expected Mr. Guido to retain new counsel for Engreen by February 29, 2016 and advised Hilco’s counsel of that expectation in an email of that date;

(o) that there was nothing in writing from Engreen’s new lawyers confirming their retainer and no Notice of Change of Lawyers was filed as at March 8, 2016; and

(p) that in all of the circumstances there would be no unfairness or prejudice to Engreen to proceed with the Hilco Motion but there would be prejudice and unfairness to Hilco if an adjournment was granted, even for a brief time.

Motion to Enforce the Minutes: Background

[16] This litigation arises from the purchase by Hilco of certain industrial machinery and equipment from Engreen. The machinery and equipment were and are located in the DuPont Factory in Maitland, Ontario.

[17] Hilco and Engreen entered into an asset purchase agreement dated May 13, 2015 (“the APA”). The APA allowed Hilco to sell to third parties the industrial equipment it had purchased from Engreen. Hilco’s sale to third parties was by way of public auction. Pursuant to the APA, Hilco paid Engreen USD$1,150,000 for certain assets located in the DuPont Factory. In accordance with the APA, Engreen granted Hilco a licence to access the DuPont Factory to conduct the auction and thereafter to remove the assets sold by Hilco to third parties.

[18] The auction took place on July 23, 2015. Thereafter, steps were taken by the various third party purchasers of Hilco to disconnect the purchased equipment and machinery from the DuPont Factory.

[19] There are companies specializing in the removal of such equipment generically called “riggers”. On August 20, 2015 an alleged theft took place by an individual employed by Baker Rigging & Mechanical Inc. (“Baker”). Baker was retained by some of the third party buyers to disconnect and remove the purchased assets.

[20] After discovering what it believed to be a theft and improper removal of assets, Engreen denied Hilco, Baker, and the third party purchasers access to the DuPont Factory. This prevented the delivery to the third party purchasers of the purchased assets.

[21] According to the affidavit of Brent Bonham, VP of Operations of Hilco Industrial LLC, an affiliate of Hilco (“Bonham”), sworn February 17, 2016 in support of the Hilco Motion, the estimated total value of the assets sold to third parties and still inside the DuPont Factory was approximately USD$1,331,748.90.

[22] Bonham stated that several third party purchasers have claimed damages from Hilco; demanded return of their money; and threatened litigation. He says that, on November 13, 2015, when it was unable to negotiate access to the DuPont Factory, Hilco sued Engreen.

[23] In its 23-page statement of claim, Hilco sought, in part, an injunction requiring Engreen to provide Hilco, its agents, and the third party purchasers access to the DuPont Factory for the purpose of allowing the purchased equipment to be removed and released to the third party buyers. On November 16, 2015, Hilco served the Injunction Motion, seeking a mandatory injunction requiring Engreen to let Hilco and its agents into the DuPont Factory to remove the purchased assets.

The Injunction Motion

[24] The Injunction Motion was originally returnable November 18, 2015. On November 17, 2015, counsel wrote to the trial co-ordinator at Brockville to advise that the parties had consented to adjourn the Injunction Motion to Friday, December 11, 2015 at 2 p.m. The letter also advised that in the interim, Engreen agreed to allow Hilco’s representatives and Master Electrician to access relevant portions of the DuPont Factory and to conduct a full-day safety inspection on Friday, November 20, 2015 to assess safety issues that might impede the removal of the remaining assets. A representative of Engreen would accompany Hilco on the safety inspection and personal waivers of liability would be signed with respect to injury that might arise from the safety inspection.

[25] Negotiations between the parties continued. On December 1, 2015, the Minutes were signed by Hilco and Engreen. Mr. Guido signed on behalf of Engreen.

The Minutes

[26] The Minutes were attached as Exhibit “D” to Bonham’s affidavit sworn February 17, 2016. The Minutes have eight paragraphs and are two pages long. I paraphrase the Minutes as follows:

(1) The parties will jointly advise the Court by way of letter that the Injunction Motion will be dismissed without costs following the removal of the remaining equipment sold to Hilco.

That letter was sent to the court on December 7, 2015.

(2) The parties agreed to use reasonable commercial efforts to agree on the scope of work to be performed by an agreed-upon rigging company to remove the remaining assets from the DuPont Factory. Upon reaching agreement as to the rigger, Hilco would pay USD$60,000 directly to Engreen and USD$40,000 to the Lawyers’ trust account. The latter payment was to be released to Engreen once the remaining assets had been removed. Hilco also agreed to pay HST on this payment, should Engreen show that it was subject to HST.

(3) From the date that the removal of the remaining assets resumed, Hilco and its third party purchasers would be given 90 days to access the DuPont Factory to remove the assets. Hilco’s insurer and contractors – mechanical, electrical etc. would also be given access to assess the alleged damage. This paragraph specifically provided:

Engreen agrees that the access rights described in this paragraph will not be interrupted by Engreen for any reason whatsoever unless ordered by the court as a result of a future material breach of the APA or these minutes of settlement by Hilco.

(4) Removal of the assets was to be carried out by Channel Industries pursuant to the agreed-to scope of work or by another mutually agreed-upon rigging company or companies.

On the Motion, Mr. Friedland advised the Court that the APA states, and is usual in the trade, that Hilco, as purchaser, is to cover the cost of the rigger at the first instance. Hilco was free to pass the cost along to the third party purchasers.

(5) Hilco was to retain its Master Electrician to ensure that it was safe to remove the assets, understanding that the power might need to be cut off to the DuPont building and portable generators used.

(6) Hilco agreed that, without waiving or releasing any claim or defence of Hilco under the APA or for damages that result from the lack of heat, Engreen was not obliged to turn on the DuPont Factory’s heating system or to repair the freight elevators.

(7) The Minutes were without prejudice to the parties seeking damages from each other or indemnity from their insurers. They were not to be treated as admission that Engreen suffered damages or of liability on the part of Hilco or its agents. The USD$100,000 was not to be refunded to Hilco for any reason other than the breach of the Minutes. Nor was that payment to be credited toward any damages payable by Hilco in the litigation.

(8) In the event that the scope of work referred to in the Minutes resulted in the removal of more than the assets that were sold under the APA, the Minutes did not preclude Engreen from claiming damages from Hilco, which claim Hilco was entitled to deny and/or defend.

Events after the Signing of Minutes:

Engreen Defence and Counterclaim

[27] Engreen delivered a 20-page Statement of Defence and Counterclaim dated December 29, 2015. Engreen added a number of new defendants by way of counterclaim: Hilco Global, Hilco Industrial LLC, Hilco Industrial Canada ULC, Hilco Asset Sales Canada Corp., Baker Rigging & Mechanical Inc. and AuctionReady Inc.

[28] A copy of Engreen’s Defence and Counterclaim was contained in the Lawyers’ Motion record. In it, Engreen denies that Hilco is entitled to mandatory injunctive relief. Engreen also claims special damages of $10 million and general damages of $30 million for lost profit and economic loss.

[29] Sometime after the Minutes were signed, counsel agreed that the Hilco defendants by counterclaim would not be required to deliver a defence until approximately March 26, 2016.

Actions to Complete the Minutes

[30] Pages 10 to 17 of the Bonham affidavit sworn February 17, 2016 set out a chronology of events that occurred after the signing of the Minutes. As evidenced in that chronology, discussions and negotiations took place between Hilco and Engreen with respect to which rigger was to be used. Speaking for Engreen, Mr. Guido was in favour of Channel Industries (“Channel”).

[31] Given the accusations against Baker, Mr. Guido was understandably interested in who would be retained to disconnect and remove the purchased assets. Similarly, as Hilco was liable to pay the rigger’s fees, it was understandably interested in choosing a company that was competent but competitively-priced. For similar reasons, Hilco wanted Channel to provide a detailed and complete description of the scope of work that it was to perform.

[32] As set out in the Bonham chart and in emails in Hilco’s Motion record on the Hilco Motion, there were ongoing discussions and negotiations among Hilco, Engreen and Channel regarding Channel’s scope of work, its fees and the timing of payments to Channel.

[33] In resisting the Hilco Motion and the enforcement of the Minutes, Mr. Guido asserts that Hilco delayed in implementing the Minutes. He asserts his email of December 18, 2015 confirmed Engreen’s agreement to Channel’s scope of work. Counsel for Hilco disputes that by December 18, 2015 an agreement had been reached as to Channel’s scope of work and fees. Hilco pointed to the ongoing exchange of emails with Channel after December 18, 2015 requesting a clear outline of the scope of work, negotiating fees and timing of payments.

[34] The emails that are attached as exhibits to the Bonham affidavit clearly show that Mr. Guido was kept informed of the status of negotiations between Hilco and Channel. They also clearly show that it was not until January 27, 2016 that a final agreement was reached with Channel regarding the scope of work, the fees and timing of payments.

Channel Provides detailed Scope of Work

[35] Channel provided photographs of all the equipment that they were to disconnect and clearly marked, in colour, the disconnect points. Mr. Freidland advised the Court that these photographs set out the Channel scope of work. The photographs are contained in the Hilco Motion Record from pages 182 to 243. At my request, Hilco filed a second brief with colour photographs. The colour photographs more clearly indicate the disconnect points.

[36] The colour photographs referenced above were provided by Channel to Mr. Guido for his approval. Mr. Guido approved Channel’s proposed scope of work by email dated January 27, 2016 at 11:01 a.m. His email read: “Brent, [Bonham] I’m in agreement with Channel Industrial’s detailed scope of work, subject to the terms of our interim settlement resolution and then making the building safe to work in.” (Exhibit “AA” to Bohnam Affidavit, March 8, 2016.)

[37] The events that took place on and after January 27, 2016 are important:

(a) on January 28, 2016 10:50 a.m. Bonham emails Mr. Guido asking him to forward the wire transfer instructions for him and the Lawyers. He advises that Hilco would need access to the DuPont Factory in the following week to allow customers to inspect the equipment and he asks about how to gain access;

(b) on January 28, 2016 11:37 a.m. Mr. Guido emails Bonham providing Engreen’s bank wire instructions and advising that Bonham should be receiving the Lawyer’s trust account wire instructions shortly. In this email, Mr. Guido states: Please proceed send send (sic) funds and confirm wire transfer to Engreen Maitland Inc. accordingly;

(c) on February 1, 2016 8:34 a.m. Bonham again asks Mr. Guido for the Lawyers’ wire instructions;

(d) on February 1, 2016 9:41 a.m. Mr. Guido provides Bonham with the particulars for the wire transfer to the Lawyers’ trust account;

(e) on February 3, 2016 10:42 a.m. Bonham receives an email from Hilco’s internal financial analyst asking if an agreement has been reached and, if so, Hilco advises that it is ready to make the wire transfer that day;

(f) on February 3, 2016 10:51 a.m. Bonham confirms with Hilco’s financial analyst that the wire transfer can proceed;

(g) on February 3, 2016 10:53 a.m. Bonham emails Mr. Guido to advise that the payments as per the terms of the Minutes were processed that morning and that they had people travelling to Maitland [Ontario] that evening and would be in the DuPont Factory the following day to inspect assets and reconcile invoices;

(h) on February 3, 2016: 1:15 p.m. Mr. Guido emails Bonham:

Brent,

Further to you email this morning, you have not performed your obligations according to the terms of the interim settlement resolution.

I have not received the required funds nor has Channel Industrial’s contract been consummated.

As you know, I have approved the scope of work for Channel Industrial as at December 18, 2015.

More than forty two days have passed without you sending funds, which were due forthwith upon my approval, nor have you performed your obligations.

The additional damages and losses incurred due to your negligent delays far exceed the value of any equipment and will be added to my claim for damages and losses.

You are currently in breach of the interim settlement resolution. You are not permitted in the building under these circumstances.

Please immediately send me proof of your wire transfers as well of proof that you have engaged Channel Industrial and paid their deposit per the terms of their quotation.

I reserved all my rights and remedies at law.

(sic)

(Bonham Affidavit, Exhibit “II”)

(a) on February 3, 2016 4:17 p.m. Bonham emails Mr. Guido:

Anthony,

While we disagree with the dates and assertions in your email below, we are prepared to remit (and had actually initiated this morning) payment to both you and Channel. However, due to your statement below that we are in breach and will not be allowed access, we have paused the release of the wires pending your confirmation that the interim minutes of settlement still apply and we are not in breach (and/or are deemed cured – again we dispute that we are in breach) and that we will be granted access pursuant to the interim minutes of settlement once payment is received. Again, we are prepared to immediately fund once you confirm.

I attempted to call you but your voice-mail will not accept messages. Please call me if you wish to discuss so we can work this through and move forward. Thank you.

(b) on February 4, 2016 11:03 a.m. Bonham emails Mr. Guido asking him to respond and stating: “We would like to release the wires and begin work in the facility.”

(c) on February 4, 2016 3:09 p.m. Bonham emails Mr. Guido: “Anthony, please respond.”

(d) on February 8, 2016 7:03 p.m. counsel for Hilco emails counsel for Engreen confirming telephone discussions of that day and Friday, February 5 in which Hilco’s counsel was advised that the Lawyers had no instructions. At the request of the Lawyers, counsel for Hilco sets out in detail the chronology of events, (most of which are outlined above). The Lawyers then forward this email to Engreen.

(e) on February 10, 2016 4:19 p.m. counsel for Hilco emails the Lawyers reporting that they have still received no response to their attempts to contact Mr. Guido and confirming that Hilco remains willing to proceed with the Minutes and to make payment to Engreen, the Lawyers in trust, and to Channel, failing which Hilco would seek the assistance of the court to enforce the Minutes.

(f) The Lawyers forward that latest communication to Mr. Guido who responds directly to Bonham on February 11, 2016 at 2:41 p.m. In his email, Mr. Guido states that Hilco has defaulted in not performing its obligations of the interim settlement by paying the parties and accuses Hilco of lying about sending payments and stating that “a new potential without prejudice settlement arrangement has to be resolved…” The email further states:

The original agreement clearly declared a November 20, 2015 deadline to get the equipment out; otherwise, the remaining equipment was deemed to be abandoned. The remaining equipment was not removed by November 20, 2015, through no fault of Engreen Maitland Inc. and therefore Hilco has consequently agreed to have abandoned the remaining equipment, by virtue of the terms of the original asset purchase agreement.

The interim minutes of settlement were without prejudice to Engreen Maitland Inc.’s lawsuit against Hilco and its agents and given that Hilco has intentionally defaulted on performing its obligations, the interim minutes of settlement are declared to be null and void.

Furthermore:

More damages to the building have since occurred due to pipes freezing and breaking. The water supply had to be shut off, and further damages have resulted, the continuing liability is increasing.

We recently discovered more upper-level rooms full of evidence of theft and reckless vandalism and massive damages. We have photos to confirm this. More discovery this week of substantial building and other equipment that was damaged and stolen that was never sold to Hilco.

We found Chris Baker’s machine for stripping electrical wires, and related equipment for hacking and severing metal, which was used to extract and steal the copper, metals and machinery that was not to be removed. The damages throughout the building are massive and unconscionable

Chris Baker is now implicating Bruce Lyle, President of Hilco in this matter.

The fixed and variable operating cost of the building are about $100,000 per month. Hilco’s made the building unusable since the crime was confirmed on August 20, 2015.

The claim against Hilco and its agents amounts to $40,000,000, which far exceeds the value of any remaining equipment.

Hilco has unequivocally breached their agreement on multiple material levels, including theft, fraud, damages, vandalism, and as such they have no right nor legal basis to access to the building. Having said this, I’m available for a call anytime from 1:30 p.m. to 3:30 p.m. tomorrow or anytime from 10:30 a.m. to 12 noon on Monday, should you wish to discuss this matter further. If so, let me know what time works for you.

(g) on February 11, 2016 4:28 p.m. Bonham emails Mr. Guido disagreeing with what Mr. Guido has said in his February 11 email. He advises that Hilco has complied with the Minutes and has worked with Channel to obtain an acceptable scope of work, a process in which Mr. Guido was involved. He confirms that Hilco remains willing to abide by the terms of the Minutes once Mr. Guido confirms Hilco’s ability to access the site.

(Note: the above uses my defined terms.)

Engreen’s Arguments on the Motion

[38] In his March 8, 2016 affidavit, contained in the Engreen Record, Mr. Guido again asserts that Hilco did not act with urgency despite having left his building in an unsafe and dangerous condition since August 20, 2015. He further asserts that Hilco did not send payment forthwith and that it ought to have done so on December 18, 2015. Mr. Guido asserts that Hilco lied about wire transferring the funds on February 3, 2016 and was in breach of the Minutes because no funds were sent.

[39] Mr. Guido’s March 8 affidavit also asserts that Hilco breached the APA by failing to remove the equipment by November 20, 2015; that Hilco sold equipment that belonged to Engreen; failed to disconnect the equipment at the first disconnect point; and left the DuPont Factory in a damaged and unsafe condition.

[40] These allegations are not new. They are set out in Engreen’s Defence and Counterclaim, dated December 29, 2015.

The Minutes are Without Prejudice to the Litigation

[41] It is important to recognize that the Minutes resolve only the Injunction Motion. The Minutes specifically preserve all rights to raise claims and defences in the main litigation.

[42] In his submissions, Mr. Guido stated that between January 27 and the first days of February, 2016, he discovered damage to the DuPont Factory that he had not known about when he signed the Minutes on behalf of Engreen. He stated that, had he known on December 1, 2015, what he discovered later and, even as late as the first week of March, 2016, he would not have entered into the Minutes.

[43] Mr. Guido argued that he did not know the extent of the damage to the DuPont Factory because it is a very large building. The Court notes that Mr. Guido’s company owned the DuPont Factory and, for all times material to the Hilco Motion, had possessed (possession) of it to the exclusion of Hilco and the other parties to the litigation.

[44] Mr. Guido’s assertions in argument on the Hilco Motion and as set out in his affidavit about his lack of knowledge of the state of the DuPont Factory are implausible: Not only did Mr. Guido’s companies have possession of the DuPont Factory, on and after August 20, 2015 Mr. Guido knew that it may have been damaged. Indeed, that is precisely what is asserted in Engreen’s counterclaim. Therefore, I do not accept that explanation as a proper or reasonable basis for Engreen refusing to complete or honour the Minutes.

[45] The timing of Mr. Guido’s refusal to comply with the Minutes coincides with the date upon which Hilco was to transfer funds to Engreen and to the Lawyers. The Lawyers’ Motion Record was obtained by Hilco counsel prior to the Hilco Motion and its contents were no secret. The Lawyers stated that one reason for seeking to be removed as Engreen’s counsel was non-payment. Compliance with the Minutes could have resulted in a payment of USD$40,000 to the Lawyers, in trust, with whom Engreen appears to be in a fee dispute.

[46] At the hearing of the Lawyers’ Motion, Mr. Guido was cautioned about not disclosing information or discussions that were subject to his solicitor and client privilege. In the face of those warnings, Mr. Guido volunteered that he had a contingency arrangement with the Lawyers. He also volunteered that he was unhappy with the Minutes and told the Lawyers in early February that he was no longer agreeable to that settlement. That is also consistent with what Mr. Guido told Bonham in his February 11, 2016 email.

[47] Mr. Guido made clear and concise submissions on the Hilco Motion. He argued that the Court ought not to enforce the Minutes because Mr. Guido would never have signed them had he known on December 1, 2015 what he knows now.

[48] Mr. Guido did not assert that he did not understand the Minutes or that he was pressured into signing them against his will. As he signed them himself, there is no possible assertion that the Lawyers signed the Minutes without his approval. Both his affidavit and his oral submissions lead to the same conclusion: In or around February 3, 2016 Mr. Guido determined that he would no longer be bound by the Minutes.

The Minutes do not Resolve the Litigation

[49] It bears repeating that the Minutes are limited to resolving the Injunction Motion. The underlying litigation is ongoing. Engreen has made many allegations of loss and damages as against the defendants by counterclaim, which they will be entitled to prove.

Prejudice to Hilco

[50] Hilco compromised its position when it agreed to enter into the Minutes rather than to proceed with the Injunction Motion. Not only did it lose the opportunity to obtain a mandatory injunction, it also agreed to make a gratuitous payment to Engreen of USD $100,000. Further, although the APA did not require Hilco or its third party purchasers to use a rigger chosen by Engreen, in the Minutes, Hilco has agreed to do just that by accepting Channel.

[51] Despite Engreen’s refusal to abide by the Minutes, and Mr. Guido’s clear repudiation of the Minutes, Hilco brought this Motion to enforce the Minutes. In Hilco’s submissions, it has proceeded with the Hilco Motion to enforce the Minutes as that appears to be the most direct way to move forward with least loss to Hilco both financially and reputationally.

[52] Prior to his email of February 3, 2016 1:15 p.m., the actions of Mr. Guido are consistent with Engreen acting in accordance with the Minutes and his agreement with the scope of work that had been negotiated between Hilco and Channel. His actions after that date are a repudiation of the Minutes: He asserted that Hilco had breached the APA; had abandoned the equipment that remained at the DuPont Factory after November 20, 2015; committed theft, etc.

[53] Channel provided a detailed scope of work to which Mr. Guido approved. At the Hilco Motion Mr. Guido could not identify any piece of equipment or machinery referenced in Channel’s detailed work order as one which Hilco had not purchased or was not entitled to sell.

[54] Any alleged concerns expressed by Mr. Guido about further damage to the DuPont Factory by reason of Channel’s removal of equipment are disingenuous: he urged Hilco to hire Channel to disconnect and remove the purchased assets. He did so in the face of Hilco’s initial reluctance to use Channel. Hilco capitulated in order to facilitate the completion of the Minutes.

[55] I find that Hilco acted throughout in good faith in its efforts to fulfil its obligations pursuant to the Minutes. I find that Engreen’s last minute repudiation of the Minutes to be without any real or reasonable explanation or basis.

[56] It would be unfair to allow Engreen to receive the benefit of the adjournment of the Hilco Injunction Motion - which would have cost both parties a significant amount and (in) legal fees and which Engreen could well have lost – without requiring Engreen to honour the settlement of the Hilco Injunction Motion. The Minutes included other consideration including a gratuitous payment to Engreen of USD $100,000 as well as the agreement by Hilco to use Channel as the riggers.

[57] Even Mr. Guido’s email of February 3, 2016 1:15 p.m. is inconsistent: on the one hand he accuses Hilco of breaching the Minutes and advises that they will not be permitted to enter the building and on the other hand asks that they send him proof of the wire transfers.

[58] I find that Mr. Guido’s February 3 email fully justified the action of Hilco in “pausing” the wire transfers. Had it done otherwise, Hilco would have paid USD $100,000 gratuitously to Engreen and received nothing in return.

The Law

[59] The Courts favour settlement of lawsuits. There is an overriding public interest in favour of settlement. This policy promotes the interests of the litigants by saving expense to them and the strain upon the overburdened court system. (Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37 – at para. 11.)

[60] In this case, the Minutes resolved a contentious motion and offered a way to avoid litigation threatened by the third party purchasers. The Minutes also limited or extinguished a potential head of damages to be claimed by Hilco for financial and reputational harm. The Minutes preserved Engreen’s rights to pursue Hilco and the other defendants by counterclaim for losses they claim to have suffered.

[61] When a party looks to the court to enforce Minutes of Settlement, the court has discretion to grant or deny that relief. However, that discretion is not unlimited. In considering his authority to enforce a Rule 49 Offer to Settle, Justice Misener considered the applicable jurisprudence:

Those judgments emphasize the judicial obligation to consider all of the circumstances of the case at hand, and to then decide whether it is fair to enforce the settlement. Although I risk unduly limiting my discretion by saying so, I think the right approach is to consider that a settlement effected pursuant to Rule 49 ought to be enforced, and so judgment ought to be granted, unless the offeror satisfies the judge that, in all the circumstances, enforcement would create a real risk of a clear injustice. It seems to me that that approach is required because it is good public policy to encourage settlement, and it would be quite inconsistent with that policy to decline enforcement unless a good reason for doing so is shown. (Brzozowski v. O’Leary, [2004] O.J. No. 3230, at para. 44)

[62] Although it is (has) not been asserted that the Minutes were made pursuant to a Rule 49 offer, in my view, the above principle has application to a negotiated settlement. Based on the facts and reasons set out above, I find that a clear injustice would be created if the Minutes were not enforced. Given the conduct of Engreen through its principal, Mr. Guido, Hilco had every reason to expect that the Minutes would be enforced and it invested time and money in fulfilling its obligations under the Minutes.

[63] In deciding whether or not to enforce an accepted offer, the court may consider whether the parties’ pre-settlement positions remained intact; whether there would be prejudice to the party seeking to enforce the settlement, if the settlement were not enforced; the extent of the prejudice to the party seeking to resist the settlement if the settlement was enforced and whether third parties who were awarded be affected if the settlement was not enforced. (Centorame v. Centorame, 2012 ONSC 6405 at para. 65, citing Milios v. Zagas, 1998 7119 (ON CA), [1998] O.J. No. 812 at para. 21 (C.A.)).

[64] As set out above, Hilco’s pre-settlement position is not intact: it has lost the early motion date for the argument of the Injunction Motion and it has spent time, legal fees and other fees in negotiating with Channel. That presents prejudice to Hilco both financial and reputational. Given the ongoing litigation between the parties, there is no real prejudice to Engreen, who claims that its losses are many times the value of the assets to be removed from the DuPont Factory. Finally, the third party purchasers will be affected if they are deprived of the opportunity of the retrieving of the equipment that they have bought.

[65] Despite the arguments advanced by Mr. Guido on the motion that Hilco has acted in bad faith, his and Engreen’s conduct as documented in the various email exchanges, leads to the conclusion that it is Mr. Guido and Engreen who have acted in bad faith.

[66] For all the reasons set out above, I grant the motion brought by Hilco to enforce the Minutes.

Can the Minutes still be Enforced as Drafted?

[67] At the conclusion of the submissions on the Hilco Motion, Mr. Friedland handed up a draft order. In it, he sought:

(a) an order enforcing the Minutes;

(b) an order directing that, pursuant to paragraph 2 of the Minutes, the parties had reached an agreement that Channel Industrial Group Inc. would be used to remove the remaining assets from the DuPont property pursuant to the agreed-to scope of work submitted by Channel, as was agreed to by Mr. Guido (see my Reasons above). That scope of work is set out in an email from Dan Ingram of Channel dated January 27, 2016, which can be found at page 179 of the Hilco Record, and is based on Channel Work Order FS10333 and further identified in the photographs found at pages 180–243 of the Hilco Record, Exhibit “Z” to the Bonham Affidavit;

(c) that paragraph 2 of the Minutes, which deal with the timing of the payment of the USD$100,000 and the parties to whom the payments are to be made, be deleted and replaced by the following:

Within three (3) business days of the issuance of this Order, Hilco shall pay: (i) USD$60,000.00 directly to Engreen, by way of wire transfer or direct deposit to Engreen’s USD bank account at Bank of Montréal, less the amount of any costs award payable to Hilco by Engreen pursuant to paragraph five, below, converted to US dollars using the exchange rate published by the Bank of Canada at the close of business on the date of this order; and (ii) $40,000.00 to Engreen’s lawyer’s trust account, by way of cheque, or, if Engreen is not represented by a lawyer, by way of payment into Court pursuant to Rule 49.07 (collectively, the “Payment”), in either case to be released by Engreen once the remaining Assets have been removed in accordance with the Interim Minutes of Settlement. Hilco agrees to pay HST on the Payment upon Engreen demonstrating to Hilco that the payment is appropriately taxable.

[68] I assume that the omission of “USD$” before the proposed payment of $40,000 was inadvertent and the USD$40,000 payment should also be expressed in US currency or its Canadian dollar equivalent. If I am wrong in that assumption then I would require further submissions from Hilco and from Engreen. Otherwise, I will assume that this aspect of the Minutes was intended to remain unchanged and that the suggested amendments simply address the fact that the Lawyers no longer act for Engreen and that the original timelines set out in the Minutes no longer apply, for obvious reasons.

[69] Hilco also suggests a further term to be included in the Order: that paragraph 4 of the Interim Minutes of Settlement be deleted and replaced by the following:

Removal of the remaining Assets from the Property will be carried out by Channel Industries pursuant to the agreed-to scope of work dated January 27, 2016 attached as Exhibit “Z” to the Bonham Affidavit.”

[70] Counsel for Hilco also asked that I remain seized of this matter only with respect to the implementation of any order I might make to the Hilco Motion.

[71] Given the proposed wording, it is clear that Hilco is looking for payment of its costs from any amounts that are paid to Engreen pursuant to the Minutes. On March 8, there was no time to hear submissions regarding costs at the hearing of this Motion. Also, to have done so without providing Mr. Guido a sufficient opportunity to prepare for arguments respecting costs would have been unfair. For that reason, I do not know what Hilco would seek for its costs of this Motion.

[72] For the reasons set out above, I grant Hilco’s Motion to enforce the Minutes. I also grant the relief sought to amend the Minutes to allow Hilco three (3) business days of the issuance of this Order to make the payment of USD$60,000 to Engreen and the USD$40,000 to Engreen’s lawyer’s trust account or into Court as a payment pursuant to Rule 49.07, which latter payment to be released to Engreen once the remaining assets have been removed in accordance with the Interim Minutes of Settlement, as amended by this Order. Also, should Engreen demonstrate to Hilco that the payments are subject to HST, Hilco is to pay HST on the USD$100,000.00

[73] However, I do not order that any costs awarded to Hilco be deducted from the USD$60,000 payable to Engreen. To do so would be to rewrite the bargain between the parties and would unduly complicate and delay the implementation and enforcement of the Minutes.

[74] I do order the amendments to the Minutes as set out in subparagraph 67 (ii) and paragraph 69, above.

[75] Hilco has been successful on this Motion and is entitled to its costs. If the parties cannot agree on the costs to be paid to Hilco by Engreen, then they may make written submissions to me within 30 days of the date of these Reasons. Written submissions not to exceed 3 pages plus the draft bills of costs.

[76] When the amount of costs has been determined, Hilco will be at liberty to collect those costs from Engreen in the usual manner.

Madam Justice Liza Sheard

Released: March 15, 2016

CITATION: Hilco. v. Engreen, 2016 ONSC 1792

COURT FILE NO.: 15-0727

DATE: 2016-03-15

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Hilco Industrial Acquisition Canada ULC

Plaintiff/Moving Party

– and –

Engreen Maitland Inc.

Defendant/Responding Party

– and –

Engreen Maitland Inc.

Plaintiff by Counterclaim

Hilco Industrial Acquisition Canada ULC, Hilco Global, Hilco Industrial LLC, Hilco Industrial Canada ULC, Hilco Asset Sales Canada Corp., Baker Rigging & Mechanical Inc. and AuctionReady Inc.

Defendants to the Counterclaim

REASONS FOR JUDGMENT

Sheard J.

Released: March 15, 2016